Robinhood’s revenue fell more than expected at year’s start
NEW YORK — Growth slammed into reverse at the start of this year for Robinhood Markets, whose trading app has turned millions of people into investors for the first time.
The company said Thursday that it took in $299 million in revenue during the first three months of the year, down 43% from a year earlier. It also reported a loss of $392 million, or 45 cents per share, as its number of active users shrank amid a wave of worries weighing on stock and cryptocurrency markets. Both a decline in revenue and a loss net were expected for the quarter. But the results were worse than Wall Street analysts had forecast: a loss of 38 cents per share on revenue of $354.6 million, according to FactSet.
Growth has been flagging for Robinhood since a powerful surge during the early part of the pandemic, through the first half of 2021. At its height, Robinhood’s revenue growth was probably impossible to replicate, and it has been decelerating steadily since hitting 309% at the start of 2021. Robinhood’s most remarkable growth was due to maniacal trading for GameStop and dogecoin, which is unlikely to happen again.
Robinhood’s business does best when people use its app to trade often, whether it’s stocks or crypto, because it makes money by routing their orders to market makers and big trading firms. Thursday’s investors heard from company executives that market volatility in the last quarter had pushed some investors away or made them less likely to trade large amounts. Other factors that encouraged people to trade early in the pandemic, such as restrictions keeping them at home, stimulus checks giving cash to them and low interest rates helping prices soar on all markets, have also diminished.
Revenue earned from the trading of stocks on Robinhood’s app dropped 73% during the first quarter from a year earlier. The company makes more money from the trading of options and of crypto, and revenue there fell 36% to 39%. The company stated that it no longer plans to provide quarterly revenue guidance due to volatile markets making it difficult to predict.
Trading is becoming more difficult this year due to market fall. The Federal Reserve is trying to reduce high inflation with a sudden rise in interest rates.
The S&P 500 fell 4.9% during the first three months of the year for its first losing quarter since the pandemic-induced crash of early 2020. The losses continued in April with many of the Big Tech stocks, which are popular among younger investors, putting in some of their worst performances.
Robinhood’s own stock has struggled this year, recently falling below $10 after briefly touching $85 shortly after its stock’s debut on the Nasdaq in the summer of 2021. It rose 6.1% Thursday to close at $10. 09, before Robinhood’s results came out.
Following the release of the results, the stock fell 11.2% in afterhours trading.
Analysts focused their questions on Robinhood’s plans for growth. In recent months, the company has announced a number of new products, including additional cryptocurrencies that can be traded and a new debit card. Analysts were skeptical that the company would be able to generate new revenue from these new products.
Robinhood earlier this week said it would cut 9% of its workforce. CEO Vlad Tenev said the company wanted to cull duplicative jobs after its number of employees soared to nearly 3,800 from 700 in 2019.
The company grew its headcount so quickly in part to keep up with its explosion of users, and it attracted more in early 2022. Robinhood said it had 22.8 million cumulative funded accounts at the end of March, up 27% from a year earlier. However, Robinhood’s customers were less active during the quarter. Its number of monthly active users dropped 10% to 15.9 million in March from a year earlier. It also dropped 8% from December.
” We are seeing customers affected by the macroeconomic climate, which is reflected on our results this quarter,” Robinhood Chief financial Officer Jason Warnick stated in a statement. “At the same time, we’ve also made progress on our long-term plans and continue to pursue them aggressively.”
Wall Street is looking for Robinhood’s losses to continue to moderate, and it’s forecasting year-over-year growth in revenue may return in the second half of this year. That’s when Robinhood’s numbers will no longer be compared against the booms generated by GameStop and dogecoin from early 2021.
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